The Work and Pensions Committee says the government needs to address concerns that a housing blacklist has effectively been created by mortgage lenders’ “no DSS” policies.

NatWest came under fire in October after it was revealed that the bank was refusing to remortgage a property because it was being rented to a tenant receiving housing benefits.

The bank told landlord Helena McAleer she would either have to evict her tenant – a vulnerable elderly woman – or pay the early repayment charges and find another lender.

The DWP says it is “deeply concerned” about the extent to which mortgage providers are preventing landlords from renting to benefit claimants given the “desperate shortage” of affordable housing and the large numbers of claimants now dependant on the private rented sector.

Frank Field, chair of the committee, says: “The government claims its welfare reforms are intended to drive employment, but allowing banks to operate a “no DSS” policy is a return to the wicked old days of housing discrimination, with claimants effectively on a housing blacklist and at risk of being senselessly evicted for no greater crime than receiving housing benefit.”

He adds: “NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit. If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation.”

There are currently 4.2 million people in the UK receiving housing benefit. According to research by the Residential Landlords Association, 66% of lenders – covering 90% of the buy-to-let market – have restrictions lending to landlords who rent to tenants claiming benefit.

In a letter published by the committee, NatWest chief executive Ross McEwan said he was “extremely disappointed” with the way the case had been handled, claiming it “did not reflect the values of [the] organisation”.

But in the letter he also states: “In line with a number of other lenders …our mortgage policy for landlords with smaller property portfolios…includes a restriction on letting to tenants in receipt of housing benefit.

“This reflects evidence that rental arrears are much greater in this segment of the market and we are satisfied that this restriction does not contravene equality legislation.”

NatWest is reviewing the policy and has agreed to inform the committee of the outcome later in the year.

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